Budget

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Slide 2

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Benefits of using budgets in a business· Manage your finances effectively.· Improve management control of the business- so the managers know who is spending what and where they spending the money on.· Allows the owner or the managers to show their responsibilities- so they know what they should be achieving towards and managers and staff will be working towards the same target.· It can help with decision making- they can make decision in how much goods or services can be achieved and also time, the cost of the output can be decided as well.· Use to motivate- motivating managers and other staff to achieve the objectives of the business. The budget may also be linked to rewards such as; bonuses, where targets are met or exceeded.· Identify problems before they occur - such as the need to raise finance or cash flow difficulties· Employees can gain satisfaction from given a responsibility to meet a budget and this may lead to exceed in sales budget.…read more

Slide 3

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Drawbacks of using budgets in a business· Information may not be accurate. Human or electronic error while producing the budget.· Set at low level- if the budget is to easy to achieve there is no benefit to the business, this may lead to lower levels of output and higher costs.· Budgets should be set at realistic levels, which make the best use of the resources available.· Set at high level- if the budget is impossible to achieve, it may demotivate the employees and the managers.· Errors and inaccuracies will always remain as it is impossible to predict the future.· Events around the world such as rising energy prices or the global recession may result in failure of the whole process.· Employees may see budgets as either a `carrot' or a `stick', as a form of encouragement to achieve the targets set, or as a form of punishment if targets are missed.…read more